Issue No.25

For the month ended August 2022, the TT Composite Index returned -2.10%, led downwards by both indices. The All T&T Index decreased by -1.55% with MASSY Holdings Limited (MASSY) and Guardian Limited (GHL) returning -7.06% and -5.36% respectively. The TT Cross Listed Index fell by -3.94% over the month as the negative returns of -2.94% in Grace Kennedy Limited (GKC) and -7.60% in National Commercial Bank Financial Group (NCBFG) weighed on the Index. Over the month 7 stocks increased, 16 declined and 2 held firm.

Since the reopening of the economy COVID-19 related deaths and cases have risen. As such, we continue to encourage persons to talk all health precautions as further advances in this area should bode positively for a continued increase in economic activity and by extension the markets.

During August the S&P 500 Index returned -4.24%, losing significant ground after climbing in July. All sectors declined with the exception of Energy and Utilities which increased by 46.2% and 5.9% respectively.  Consumer Discretionary and Communications were the largest detractors, registering declines of -26.1% and -22.2%. Consumer sentiment improved 7% from 51.5 in July to 55.1 in August as concerns about inflation retreated slightly.

Second quarter GDP came in slightly better than preliminary estimates at -0.6% over the quarter and GDP for the full year 2022 is expected to be 2.0%. Retail sales jumped over 10% in July, the largest gain in five months. Moreover, the unemployment rate moved down from 3.6% in June to 3.5% in July. At his annual address from the Jackson Hole symposium in August the Federal Reserve Chairman reinforced his intention to continue increasing interest rates in order to curb inflation.

Energy prices declined for the third month in a row with WTI Crude falling from $98.62 in July to $89.55 at the end of August amid fears that slowing growth would soften energy demand. OPEC is expected to reverse policy and tighten production when it meets in September. Current estimates for global growth in 2022 and 2023 stand at 3% and 2.9%, below the 3.5% long-term average rate for the global economy.

In seeking market outperformance, the investment focus remains towards stocks and sectors which are less leveraged to the business cycle, that can absorb the risk of higher raw material and labour costs and have balance sheets which are minimally exposed to a further rise in borrowing costs. 

Fund of the month:

Scotia Short Term Income (TT$)

-High quality money market instruments and short-term fixed income securities

-Low Risk

Yields were generally higher across the curve when compared to the prior month. The 1-year rate increased from 0.98% to 1.10%, while the 10-year moved from 5.00% to 5.07%.

Month over month liquidity increased by 59.2% from $2.9 billion in July to $4.6 billion in August. Since the start of the year both the TTD corporate and sovereign bond markets have remained relatively dormant with just two corporate issues coming to market. However companies are slowly reentering the market and another corporate issue is expected before year end.

US Investment Grade corporate spreads, as measured by the CSI BBB Index, increased by 2.06% from 2.03% to 2.07% over the month of August. The US 10-year Treasury yield increased over the period, from 2.65% on July 31^st to 3.19% on August 31^st. Short term rates continued to rise ahead of long-term rates, the two-year Treasury yield rose above 3.5% during the final week of August, setting a 15-year high. During the month the Fed maintained its hawkish tone and expectations remain for higher interest rates hikes to battle inflation. Interest rate futures are currently pricing in rates in the 3.7-4% range by year end.